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US Lawmakers Could Restrict the Use of Non-Compete Agreements (protocol.com) 119

Politico's technology site Protocol reports that some U.S. lawmakers are getting angry about an unpopular but widespread corporate policy -- the non-compete agreement: Non-compete agreements prohibit employees who leave their jobs from taking similar positions with potential competitors for a certain period of time. In the U.S., somewhere between 27.8% and 46.5% of private-sector workers are subject to non-compete agreements, according to a 2019 Economic Policy Institute study.

Such agreements are unenforceable in California and limited in nearby Washington, but they can still have adverse effects on employees nationwide. That's why a current piece of legislation, the Workforce Mobility Act, seeks at the federal level to restrict the use of non-compete agreements in most situations. Sens. Chris Murphy and Todd Young introduced the bill, which would only allow non-competes in certain "necessary" situations... Non-compete legislation also has the support of President Joe Biden, who said during his campaign he would support such a bill. John Lettieri, president and CEO of the Economic Innovation Group, is a proponent of the Workforce Mobility Act and suggested the bill should enjoy broad support. "We believe we're in a position where it's possible for this to become law," Lettieri told Protocol.

"Whether you're a free market conservative or whether you're a pro-worker progressive, you can come from either of those ends of the spectrum and end up in the same place. And this is a special issue for that reason... Competition is generally good and for workers, competition among businesses for your labor is the most fundamental bargaining power you've got," he said. But if companies hinder that with non-compete agreements, they create "a downstream series of consequences that really are bad for the worker, they're bad for the broader labor market and it's increasingly clear they're bad for the broader economy as well...."

Companies such as Amazon and Microsoft — both headquartered in Seattle, Washington — and New York-headquartered IBM have all sued employees for breaking the terms of their non-compete agreements.

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US Lawmakers Could Restrict the Use of Non-Compete Agreements

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  • Unlawful (Score:5, Informative)

    by cygnusvis ( 6168614 ) on Sunday May 16, 2021 @08:50PM (#61391590)
    All non complete that lasts past the end of employment should be anti competitive and illegal
    • This. Maybe employers will be less likely to cut and run on employees if they know someone else will snap them up.

    • Re:Unlawful (Score:5, Insightful)

      by EvilSS ( 557649 ) on Sunday May 16, 2021 @09:13PM (#61391634)
      That's pretty much what this bill does. The only exceptions are pretty narrow and aimed at business owners selling or partners (in a partnership) leaving:

      The first exception is that the seller of the entirety of a business interest may enter an agreement to refrain from engaging in a similar business in the geographic areas where the business being sold has conducted business prior to the agreement. This exception extends to agreements by senior executive officials who have a severance agreement as part of the conditions of sale (i.e., a buyout provision). Second, a partner of an enterprise, in anticipation of the dissolution of the partnership or disassociation of a partner, may enter an agreement to refrain from engaging in a similar business in the geographic areas where the partnership has conducted business prior to the agreement.

      Frankly it's about damn time and I hope this passes. Non-competes should never have been allowed to be legal in the first place. I will not, however, be holding my breath. I expect a lot of corporate push-back and we both know at the end of the day, both parties are beholden to their corporate masters.

      • Re:Unlawful (Score:5, Interesting)

        by Martin Blank ( 154261 ) on Sunday May 16, 2021 @11:07PM (#61391816) Homepage Journal

        I accepted non-competes in certain professional instances in the 1990s and into the 2000s. But then they expanded to people making sandwiches for Jimmy John's and to hairdressers. At that point, I realized the the concept (even after Jimmy John's dropped theirs) had become irrevocably corrupted and were no longer about secrets but instead about restricting competition. I mean, I could wear a body cam a half-dozen times into a sandwich shop and replicate the basic idea literally next door for 50 cents less, but the minimum-wage employees had to drive ever farther to work.

        I get protecting trade secrets and preventing working with existing or prospective clients, but restricting much beyond that is ludicrous.

        • by afidel ( 530433 )

          I get protecting trade secrets and preventing working with existing or prospective clients

          Except non-competes don't accomplish either of those. The first is covered by an NDA and the second is covered by a non-solicitation agreement. I will gladly sign either of those if they are correctly crafted, but I will never again sign a non-compete unless it covers 100% of my salary and benefits for the duration of the agreement. Having been screwed by an overly broad agreement and a petty former boss once I will ne

          • by uncqual ( 836337 )

            You should also demand that your salary and bonuses, during the "forced to be on the beach", time are at least the corporate average and be sure that any merger or acquisition of the employer will preserve those.

            The salary, bonus, benefits and increases in those must also continue for the stated time even if you get other employment that is outside the area covered by the non-compete portion of the contract. Sitting out of employment for two years in a field in which you are a specialist reduces your value

            • by uncqual ( 836337 )

              I should have added, the employer should have the unilateral option to release you of the non-compete terms (and,of course, their requirement to pay you for the agreed upon term) at the time of your voluntary or involuntary termination or within 10 business days after. This way, if you haven't ended up working on anything competitively sensitive perhaps because you got fired four weeks into employment because you are a complete jerk or incompetent, the employer need to pay you for an extended period of time

            • by torkus ( 1133985 )

              To be fair, if you're a specialist benched with full pay for 2 years then you absolutely should be keeping up/learning/training in your industry. That's on you and part of the trade of getting paid not to work. I'd gladly take that trade.

              • by uncqual ( 836337 )

                Agreed. But it's very hard to keep up in some industries unless you're "commercially" active -- hearing what customers are really griping about etc. It's not just languages, frameworks, and technologies - there is a certain "feel" one gets working in the trenches on real products which customers are paying big $ for vs., for example, almost all FOSS volunteer work.

          • by torkus ( 1133985 )

            "covers 100% of my salary and benefits for the duration of the agreement"

            This. This should be a basic, mandatory inalienable requirement for any non-compete. That alone will eliminate most of them on the spot.

            Instead of a complex law with tons of weird exceptions just make the minimum allowable monthly pay for a non-compete equal to the average of your last 12 months total comp plus full health benefits. Ban them entirely for employment under 12 months or under some median income (say... 60-80k). Make t

      • https://www.legis.nd.gov/cenco... [nd.gov]

        9-08-06. In restraint of business void - Exceptions.
        A contract by which anyone is restrained from exercising a lawful profession, trade, or
        business of any kind is to that extent void, except:
        1. A person that sells the goodwill of a business and the person's partners, members, or
        shareholders may agree with the buyer to refrain from carrying on a similar business
        within a reasonable geographic area and for a reasonable length of time, if the buyer
        or any person deriving title to

    • Re:Unlawful (Score:5, Interesting)

      by ranton ( 36917 ) on Sunday May 16, 2021 @09:47PM (#61391708)

      I would rather it be something like non-compete clauses only being legal if they are paid perhaps 75% of their salary during the entire non-compete period. Or some form of severance pay (golden parachute) of equal amount. Non-compete clauses make perfect sense for your VP of Product Management, but if you want someone to give up their ability to use skills and connections built at your company to advance their career (like any other employee) you better pay them handsomely.

      Add some kind of $500k minimum total compensation for any role to qualify for a non-compete clause too. This shouldn't be used on your senior developers or middle managers.

      • Re: (Score:2, Insightful)

        by Anonymous Coward

        At first I thought your suggestion was interesting but then I realized it's still flawed in at least one major respect. The more time you aren't doing the work that you're qualified for, the harder it is to get a perspective employer to take you seriously. After all, you've let your skills deteriorate by not using them constantly.
        I think in this instance, the only winning move is to favor the worker and force businesses to accept the potential consequences of letting going/firing employees.

        • by ranton ( 36917 )

          The more time you aren't doing the work that you're qualified for, the harder it is to get a perspective employer to take you seriously. After all, you've let your skills deteriorate by not using them constantly.

          This is why the extra pay is necessary. The assumption isn't that you are sitting at home for the non-compete period. The assumption is you are working in another industry or role where you took significantly reduced pay compared to if you fully utilized your current skillsets. During that period you are building new expertise and new skills, so after your non-compete period is over you likely even more marketable. And if you took a 25%-50% pay cut over that period, you still made out well.

          This is why havin

      • What you do is make them be forced to accept every pay raise request no more frequent than every six months. If this person is so valuable his/her leaving threatens your companys profitability, then you must compensate them handsomely. I have seen too many non-compete be used to freeze wages and force people to work for them. The feds should charge them with violating the 13th amendment. Imagine the cover of Forbes say something like - USDOJ files slavery charges against Apple. - Imagine what that does to t
      • Re:Unlawful (Score:4, Interesting)

        by rundgong ( 1575963 ) on Monday May 17, 2021 @05:51AM (#61392452)

        I think it's reasonable to use it on senior developers too, under certain conditions.

        1: They keep paying 100% salary. Including average bonus and benefits of the last few years.

        2: It's not so broad that it prevents *any* work.
        E.g. If you are a programmer at Google that works on GMail front end. Then it can only prevent you from working on another email web-client. All other programming jobs are unrestricted.

        If they are willing to pay for it, and it is so limited that it can't really be used to punish the employee, then it seems like a legit case of protecting their IP.

        • If they are willing to pay for it, and it is so limited that it can't really be used to punish the employee, then it seems like a legit case of protecting their IP.

          Fuck them in the center of their brown-eye with a jumbo-sized lawn dart.

          The first thing these companies tell when you’re hired is that you live in a “right to work” state, and they can fire you at any time for any reason or no reason at all.

          Okay, fine, you cherish that fucking legislation so much, then I have a right to work, t

          • But how they are allowed to fire me is an independent problem from how they are allowed to prevent me from working afterwards.

            You can view the non-compete period as a "notice-of-termination period", where you don't have to be in the office.

            If they pay for it and there are strict limitations for what it applies to, then I think it's fair.

            In fact, getting fired and being paid my regular salary to not work for 12 months is kind of a dream scenario to be honest.

            • Then 12 months later you're applying for a new job, and the *first* thing they ask is why you have a gap. Every time. And no matter what the situation was, if you were fired for cause or because the new CEO wants to pander to investors so he can pump-and-dump, the onus is on *you* to convince the recruiter/hiring manager/whoever that this isn't a red flag. That tends to be tough, almost as tough as explaining why you're looking to leave after only 1 year, or after more than 5.
              • There is no gap. Being in a non-compete period is essentially being employed in this case.

                In fact being so good that the previous employer is willing to pay to keep you away from the competition is as green as a flag can possibly be.

                If someone sees this as a red flag, then I do not want to work there anyway.

              • by torkus ( 1133985 )

                They won't need to ask about the gap.

                On your resume you'd simply put
                Date X - Date Y - Under non-compete meanwhile...
                Completed training and certification 123
                Attended seminar 987
                Volunteered at ABC

                Why is it no one realizes a non-compete doesn't mean you have to sit home and play video games? Give me 6-12 months paid to work on self development/training/mental health? Where do I sign? I'll very gladly explain that to a future employer.

    • Let our big corp overlords keep their monopolies !

    • They are largely unenforceable unless they include compensation. I donâ(TM)t see the problem having them, as long as every party consents and understands their âoegolden parachuteâ partially pays for their unemployment some time.

      • by torkus ( 1133985 )

        They are largely unenforceable unless they include compensation. I donâ(TM)t see the problem having them, as long as every party consents and understands their âoegolden parachuteâ partially pays for their unemployment some time.

        Two problems

        - Largely unenforceable doesn't mean Big Corp can't threaten you and your Future Employer with a lawsuit. FE is likely to walk away and, at best, you're still stuck defending a lawsuit even FE fights with you AND you win.

        - Companies consider gracing you with employment to be compensation for the non-compete. But yes, they're still routinely tossed...IF they make it to court. The vast majority of civil suits are settled out of court...such as by the defendant giving in to the demands.

    • by racermd ( 314140 )

      As should all binding arbitration between parties of non-equal standing (e.g.: companies and individuals).

    • The amount of $$$$ going into the government will kill this, unfortunately.
  • by creimer ( 5076051 ) on Sunday May 16, 2021 @08:55PM (#61391600)
    One company I worked for wanted the QA testers to sign new non-compete agreement. It didn't take long to find an Intellectual Property clause that required assigning all trademarks and copyrights to the company. On and off the clock. That didn't go down too well. Everyone had personal trademarks and copyrights that had nothing to do with work. The entire department came close to quitting en masse. That clause got dropped in a hurry.
  • Non-competes have been unenforceable in California for some time, which basically led to the tech sector boom allowing employees pit employers against themselves. This is very good.
    • Yes and no.

      Massachusetts doesn't outlaw noncompetes (or at least didn't last time I checked...about a decade ago) but also has a reasonably robust tech and startup scene. Not nowhere like SF or LA but not bad. That said, the sector is a few big guys and a sizable but not huge number of mid-sized outfits, not a swarm of two-man operations.

      The consensus among management types here is that it's too hard to retain good talent in Cali because the culture there is to job hop but the culture here isn't.

      On the thir

      • Massachusetts doesn't outlaw noncompetes (or at least didn't last time I checked...about a decade ago) but also has a reasonably robust tech and startup scene. Not nowhere like SF or LA but not bad.

        Massachusetts used to have a much bigger tech and startup scene than SF.

  • by ZorinLynx ( 31751 ) on Sunday May 16, 2021 @09:04PM (#61391616) Homepage

    If a company can fire and replace a worker at any time, workers should be able to leave and replace their job at any time.

    Hopefully this passes. California has gotten along fine with them being unenforceable; time to make it so nationwide.

  • by dskoll ( 99328 ) on Sunday May 16, 2021 @09:07PM (#61391618) Homepage

    A non-compete clause makes sense if you're the founder of a company and you sell it, or you're some very important key person in the organization. But for regular employees, they should be illegal.

    In Canada (where I live) non-compete clauses are legal, but courts are reluctant to enforce them if they are over-broad. To be enforceable, they have to be limited in geographic scope, limited in time, and limited to the specific business of the company. Any non-compete clause that makes it hard for a person to find employment in their field is likely to be tossed out by the courts.

    • I completely agree. It should also come with significant compensation. If a person is going to not be able to work in their chosen profession and itâ(TM)s that important to the company then I think 50% of their previous pay for the duration of the non-compete seems reasonable.

      • by CaptainLugnuts ( 2594663 ) on Sunday May 16, 2021 @09:42PM (#61391694)
        Nope. 100% of their pay with cost of living increases and a matching raise if they can find a job that pays better in the same field but can't take it because of the non-compete.

        If they don't want you to work in the field they can pay you market rate not to.

        • people that have genuine need to be under a non compete generally are already heavily compensated for it. e.g. the crap examples used in the summary were all for execs and VP's that have massive compensation to account for the clause already. Anyone below that level should not have said clauses or like you say have ongoing compensation for the length of the clause. The execs already get it.
  • by nickwinlund77 ( 4759293 ) on Sunday May 16, 2021 @09:09PM (#61391626) Homepage

    and also Senator Joe Manchin. They won't let this pass b/c of lobbyists, yada yada..

    • This unites progressives and free market radicals against corporate greed rather than being a partisan issue. It will be interesting to see if the lobby / buying power of the corporates is enough to prevent the passage of this, or whether ideology wins.

      I'm not betting on ideology...

  • by Rosco P. Coltrane ( 209368 ) on Sunday May 16, 2021 @09:12PM (#61391628)

    I've had to sign a few during my career, and each time I landed the exact same job (or very close) somewhere else and left, my new employer and I arranged to give me a job title and description that was far enough removed from what I did previously to avoid triggering the non-compete agreement. For instance, if I was doing development, my new employer would field me as software QA engineer. Good luck proving I was in fact working the same job at my new employer's. Even if my previous employer somehow managed to get close enough to the truth, all my new employer had to do is state that employees are required to be flexible and take on roles as needed on occasions if they have the skills. And then, good luck proving that "on occasions" was 100% of the time.

    This trick is as old as dirt. Those who don't use it aren't very imaginative.

  • Jimmy John’s had them for low wage staff

  • by Cy Guy ( 56083 ) *
    Glad this is finally getting addressed at the National level. I remember hearing about this story five years when Jimmy Johns was preventing former sandwich makers from taking jobs at Subway.
    https://www.cnbc.com/2016/06/22/jimmy-johns-drops-non-compete-clauses-following-settlement.html

    No hourly and/or temp employee should be bound by a Non-Compete clause. They serve a purpose when an employee is actually creating IP, but those employees must be compensated adequately for their contributions.
  • by bloodhawk ( 813939 ) on Sunday May 16, 2021 @09:36PM (#61391680)
    Summary uses Amazon, IBM and Microsoft as examples. The people they sued were high level execs that were being hugely compensated for signing such restrictive contracts. Those are EXACTLY the sort of non-competes that should be enforceable, the ones that should be illlegal are for the lowly workers and engineers that do not get adequate compensation to make up for those clauses.
  • Companies cannot stop you from working in areas that you have experience in. For example, if you work on a kind of billing system, they can't make you sign an enforceable non compete saying you can't work for other billing system vendors as this would take away your ability to make a living with the skill set(s) you have. That is considered unreasonable. They can make you sign an NDA to not give up their secrets however. There are likely some areas where this doesn't apply, but a company cannot impede your
  • by ljw1004 ( 764174 ) on Sunday May 16, 2021 @11:08PM (#61391820)

    Here's another take on it. Say that non-compete clause is allowed for up to 12mo, but you have to pay your ex-employee twice their final salary for the duration.

  • To me it has the same smell as imaginary property or lock-in, walled gardens, etc. As in: Anticompetitive behavior through the backdoor, with the false believe one could claim it's "not monopolism", because there is a false, purely theoretical "choice".

    • Monopsony can also be common in labor markets when a single employer has an advantage over the workforce. When this happens, the wholesalers, in this case, the potential employees, agree to a lower wage because of factors resulting from the buying company's control. This wage control drives down the cost to the employer and increases profit margins. Source: https://www.investopedia.com/t... [investopedia.com]
  • Here in Aarhus, Denmark, in the 00s we saw early signs of becoming the "Silicon Valley of wind turbines". A lot of wind turbine companies started development department s in the area, where the largest companies at that time were already, to get access to all the experienced engineers in the field. But then came out the non-compete agreements. The society lost to protect short term interests of the few existing companies.
  • If they do legislation in a certain domain they shouldn't be allowed near any C-suit position of a company that falls under the regulation.
  • For some people, in some cases, a non-compete makes a lot of sense. They have knowledge critical to their employer - either business processes, technology, customer contacts etc - and e.g. preventing letting a competitor just snatch them up for their intimate knowledge rather than their skills makes sense.

    HOWEVER, this must be limited to key people, it must have a time limit, and it must come at a cost to the employer electing to enforce a non-compete agreement. In Norway [idiproject.com], the maximum duration of a non-

  • Back when I was a copier technician these were common. No, they weren't worth the paper they were written on. However, that was with one huge caveat.

    The individual companies honoured them. Even though the non-compete could not be enforced, the individual companies could refuse to hire a person in the non-compete period. This was in the interest of the companies as, due to the relative immobility of the technicians, it kept labour cost lower.

    One can say that it harmed the companies, as honouruiing suc
  • Does anyone here actually think that today's politicians are going to pass something that actually improves individual worker rights? Anyone? Anyone? It doesn't help corporations, CEO's, right-wing donors, the stock market, or Trump. For the Republicans, this is a complete non-starter. This doesn't help unions one bit. For the Democrats, this is a complete non-starter.

    Any discussion about this is kind of like when CEOs talk about "greening" their company. Pure PR talk. Intended to soothe people while no
  • Could.. but won't.

  • If they dump someone who's had to sign a NDA, then while the former employee is looking for a new job, the company PAYS HIS FULL SALARY until he finds one, up to the length of the NDA. And if that's one or three or five years, they keep paying.

  • There's going to be at least one unintended consequence here. Employees will be severely compartmentalized. They will never see the full scope of a given project. Any engineer worth his salt is going to want to understand the full scope in order to make a good implementation of their part of the project.

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